Our quarterly review of ASEAN markets is in and, though sales fell slightly in Q4, they were up 21% for full year 2022. The decline reflected a number of factors, including strong year earlier data when markets rebounded strongly from their pandemic lows, ongoing shortages of semiconductors, while deliveries in Thailand were negatively affected by localised flooding (again!). New vehicle sales in the ASEAN region’s six largest markets combined declined slightly in the fourth quarter of 2022 to an estimated 920,000 units, after growing strongly in previous quarters, according to data compiled from various industry sources including vehicle manufacturers, trade associations and government departments. Sales in Vietnam plunged by 35% in the fourth quarter, while growth was much slower in other markets. Economic growth across the region remained strong in the fourth quarter, however, lifted by a rebound in international travel and tourism in the second half of the year, strong demand for commodities, rising investment and domestic consumption. Most markets in the region have now returned to pre-pandemic levels, with strongest growth last year reported in Malaysia, of almost 42% to a record 720,658 units, followed by the Philippines and Vietnam. Indonesia was by far the largest market in the region after sales rose by over 18% to 1,048,040 vehicles or close to 31% of the regional total.

There is a massive shift occurring in the North America Light Vehicle (LV) production landscape that will impact what, where and how vehicles are built and ultimately could affect regional economies, the supply chain, labour, and consumers alike. As billions of dollars are planned to be invested by automakers to produce battery electric vehicles (BEVs) and onshore previously imported models, analysts are expecting to see a vast increase in the ability of the North America region to build vehicles. As recently as 2018, North America Light Vehicle production capacity sat at nearly 21 million vehicles across 88 plants. But in just five years from now, those numbers are expected to balloon to over 25 million vehicles and 108 plants. Analysts see BEV capacity growing by over 6 million vehicles by 2027 as traditional petrol powered vehicle capacity is reduced by over 4.5 million units. But as capacity increases – especially the capacity to produce BEVs – utilisation of that capacity is expected to remain depressed from the pandemic and chip shortage era until consumers’ thirst for BEVs catches up with the automakers’ ability to produce them.

So, what can we expect from the US auto market in 2023? There is no escaping the fact that 2022 was a disappointing year for the US Light Vehicle market. What was initially expected to be a year of solid recovery ended with the lowest sales since 2011. We were not alone in missing the mark with our outlook and neither was the US the only one to unexpectedly struggle across the world last year. However, the reasons are not particularly difficult to discern with hindsight: inventories failed to recover at the pace we anticipated, as the lingering effects of the chip shortage continued to cast a shadow over the industry. Later in 2022, inventories improved – albeit in an uneven manner – but aggressive interest rate hikes from the Federal Reserve and record-high transaction prices kept some customers out of the market. So, what can we expect from 2023? Although it may appear stubborn to repeat last year’s projection of decent growth, we believe there is good reason to have at least a modicum of optimism as we kick off the New Year.

Putting certain vehicle features behind a paywall has not only resulted in dissatisfied customers but could result in added cyber risks, too. BMW has been criticised for putting some of its cars features behind a paywall, requiring customers to pay more to access certain features such as heated seats. It has led to accusations that the company is exploiting its customers, due to the majority of these features being available as standard in many modern vehicles on the market. Also, the status of the paywall can vary through the vehicle’s life and successive owners. Due to these features already being installed during vehicle production this may prompt drivers to take vehicles elsewhere and pay to have them ‘turned on’; however, this opens the vehicle up to the risk of cyber-attacks. We spoke to Ant Martin, chief engineer and head of vehicle resilience, Horiba Mira, to learn more about why paywall vehicle features may result in unintended consequences and create cyber fragility.

Affordability is a major barrier to EV uptake. The market share of battery electric vehicles has not yet reached a point where it is large enough to warrant a widespread price drop. One way in which the mainstream adoption of electric cars could potentially be encouraged is via the increased uptake of used EVS. This is what the financial team at Volkswagen in the UK have been exploring. The mission is to aid affordability and encourage the mass-market transition to BEVs as the fleet is turned over and more second-hand electric cars become available. According to Volkswagen, the UK is expected to see an explosion in EV uptake over the next five years, with used EVs central to mainstream adoption. Volkswagen Financial Services UK is readying an all-new finance offer for customers wanting to own a used EV in the ID. range (over 24 months). We spoke to Volkswagen financial services CEO, Mike Todd to learn more about this issue.

Big step for autonomous: Mercedes‑Benz claimed to be the world’s first automotive company to bring SAE Level 3 conditionally automated driving to the US with Nevada being the first state to confirm compliance of the system with state regulations. This means the brand’s Drive Pilot system is the first and only SAE Level 3 system in a standard production vehicle authorized for use on US public freeways. Complying with the requirements of Nevada Chapter 482A for Autonomous Vehicles, the system will allow the driver to hand over the dynamic driving task to the vehicle under certain conditions. The automaker aims to expand to California later this year with certification documents already filed with state authorities. Drive Pilot will be available in the US market as an option for model year 2024 S-Class and EQS Sedan models with the first cars delivered to customers in the second half of 2023. Certification in Nevada marks the start of international rollout and, with it, the dawning of a new era,” said M-B CTO Markus Schaefer.

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Hyundai Motor Company announced plans to invest KRW10.5trn (US$8.5bn) this year mainly to strengthen its presence in the electric vehicle (EV) market and other eco-friendly vehicle segments, as the company continues to target key growth areas of the global vehicle market. This included KRW5.6trn of capital expenditure, KRW4.2trn for research and development and KRW700bn for strategic investments. The announcement came as the company reported upbeat financial results for 2022 with revenue rising 24% to KRW38.5trn and operating profit more than doubling to KRW3.36trn as the company rebounded strongly from the pandemic. On a consolidated basis, revenue rose 21% to a record KRW142.5trn last year from KRW117.6trn in 2021, driven by strong demand for upmarket Genesis models and SUVs, as well as favourable exchange rates. The automaker said it expected consolidated revenue to rise by around 12% in 2023, to generate a consolidated operating margin of 6.5%-7.5%. The company had set a sales target of 4.32m vehicles for this year, up 9.6% on last year, helped by the launch of new EV models including the Kona Electric, Genesis GV60, the electrified GV70 and Ioniq 6.

Surprise shake-up at the top: Toyota Motor said Takeshi Uchiyamada would resign from his post as chairman of the Board of Directors. Akio Toyoda would be appointed the new chairman and Koji Sato would replace him as the new president and chief executive officer from 1 April. Sato (53) is currently chief branding officer and president of Lexus. Reuters said the timing of the announcement was a surprise. Under Toyoda (66), who headed the company for more than a decade, the automaker has appeared reluctant to embrace electric vehicles, arguing the hybrid technology it pioneered with its once market leading Prius was a better fit for many drivers. It also touted hydrogen-powered cars as the future, raising fears it would be left behind by the rise of electric vehicles. That insistence on hybrids and hydrogen also prompted criticism from investors and environmental activists who once widely praised Toyota‘s technology and emissions record.

Grupo Antolin has developed a new sustainable car headliner produced from organic waste. It has developed a headliner substrate for vehicles with polyurethane obtained from organic waste and recycled PET bottles. The headliner is laminated with a textile made from recycled polyester fibres. The headliner, which has been released in serial production for an unnamed new car model, has the same appearance and properties than a standard headliner, so the sustainability improvement happens without any reduction in mechanical or physical properties. This achievement has been made possible by a manufacturing process developed in collaboration with key suppliers. For the core PU foam, the supplier has developed a process by which the fossil-based raw materials have been replaced by renewable feedstock derived from organic waste or food industry residues. The fabric laminated to the headliner substrate has been manufactured by Borgstena entirely with polyester yarns from recycled PET bottles and using electricity from renewable sources in the manufacturing process.

The battery startup Britishvolt owed as much as GBP120m to creditors when it collapsed last week in a major blow to hopes of sustaining the British car industry, The Guardian reported. The UK paper said creditors were expected to recover a very small proportion of the debts although there were understood to be several bids for the company and its assets. EY, a professional services firm, is handling the administration. EY is hoping to find a buyer for the remainder of the business – which has 26 staff remaining on its payroll – and the ownership of the site in Northumberland. The deadline for initial offers for the Britishvolt assets was Tuesday evening. The report noted Britishvolt had been hailed by the former prime minister Boris Johnson as an “electric vehicle battery pioneer”, and was seen – in the absence of many more established rivals – as a flagship project for the government. Attracting battery production was seen as key to retaining automotive industry jobs and the government promised to give Britishvolt GBP100m in funding if it could meet milestones related to equipment purchases. The Guardian said Britishvolt had received support from FTSE 100 companies Glencore, Ashtead and abrdn’s subsidiary Tritax. However, it ran out of cash before it could build its factory, amid revelations of profligate spending.

UK car production declined 9.8% in 2022 to 775,014 units, according to The Society of Motor Manufacturers and Traders (SMMT). The lobby group said December “rounded off a volatile year” with output down 17.9% after growth in October and November with most of the year’s volume loss occurring in the first half. The annual total was 84,561 units down on 2021 and 40.5% below the 1,303,135 cars made in pre-pandemic 2019, equivalent to a loss of over half a million cars. The main reasons for the depressed output were the crippling global shortage of semiconductors, which limited the ability to build cars in line with demand, significant structural changes, reflecting a loss of production at two volume manufacturing sites (including Honda Swindon), and the impact of supply chain pauses in China due to Covid lockdowns. Despite these challenges, UK factories turned out a record 234,066 battery electric (BEV), plug-in hybrid (PHEV) and hybrid (HEV) electric vehicles, with combined volume up 4.5% year on year to represent almost a third (30.2%) of all car production. Total BEV production rose 4.8%, with hybrid volume up 4.3%.

Good news: Jaguar Land Rover said it achieved positive free cash flow and profitability in fiscal Q3 as semiconductor supply challenges eased in the quarter. Revenue was up 28% year on year to GBP6bn reflecting strong model mix and pricing as the production ramp up of the new Range Rover and SPORT continued with 27,456 units wholesaled in the quarter, up from 13,537 in Q2. Profit before tax in the quarter was GBP265m, up from a loss of GBP9m a year ago with a positive EBIT margin of 3.7%, up from 1.4% in Q3 FY22. The higher profitability reflected increased wholesale volume with favourable mix, pricing and foreign exchange offset partially by higher inflation and supplier claims largely related to constrained volume. Profit after tax in the quarter was GBP261m, up from a loss of GBP67m in Q3 FY22.

Clever new HVAC tech: after decades of warm air convection heating, Lexus is using two panels in the upciming RZ BEV to create infrared radiation to warm the driver and front seat passenger. Unlike traditional convection heating, which warms the air, this design heats only solid objects in the panels’ line of sight. The radiant heat is also claimed to be extremely efficient as it warms occupants more quickly and reduces energy consumption by about 8% by delivering heat only where required. It also reduces the load on the heating ventilation and air conditioning system and helps safeguard the RZ’s estimated 470km range. “The comforting sensation is similar to having a warm blanket placed around legs on a cold day,” the automaker said. “This is achieved by hiding the two radiant heaters at knee level, behind the lower instrument and steering column panels.” Driver or front seat passenger can avoid overheating with physical contact to the panel which automatically reduces temperature to around 43 degrees Celsius to prevent discomfort.

Europe could end its reliance on China for electric car batteries by 2030 but only if it keeps pace with Joe Biden’s US$369bn (GBP298bn) green subsidy spree, The Guardian said. The British newspaper said a report by the renewable energy campaign group Transport & Environment said the EU was on track to produce enough lithium-ion battery cells by 2027 to meet demand and cut China from supply chains. The study forecast Europe’s reliance on China for the refining and processing of battery metals could also fall dramatically, predicting over half of Europe’s refined lithium demand could come from European projects by 2030. There are now no lithium refineries in Europe, and about 90% of the world’s processing of the metal takes place in east Asia, the report said. But refinery projects under way in Germany and France are expected to boost Europe’s prospects, and planned EU legislation on critical raw materials is designed to ensure they meet high environmental standards. The Guardian noted MPs had raised concerns Britain’s electric vehicle supply chain is overly reliant on China, a key vulnerability amid political tensions between Beijing and the west.

Have a nice weekend.

Graeme Roberts, Deputy Editor, Just Auto